The myth-busts, hot takes, explainers, and tools worth keeping.
⚡Myth Buster· 2
⚡Myth Buster08:48
Why Inflation Does Not Simply Fall to 2% and Stay There
The discussion challenges the assumption that inflation naturally returns to a policy target and remains stable. Achuthan argues that inflation repeatedly rises and falls, making a stalled decline or renewed upturn a normal cyclical possibility rather than an anomaly.
Inflation has its own recurring cycle
A decline from an extreme peak does not guarantee continued disinflation
Policy targets do not suspend cyclical behavior
A sideways leading gauge can signal sticky inflation
“One of the things that's critical to understand is that inflation is cyclical.”
“It doesn't go down to some number and hang out. It likes to cycle.”
#inflation#federal-reserve#disinflation
⚡Myth Buster57:49
The Post-COVID Productivity Jump Was Not an AI Miracle
The apparent productivity boom after reopening partly reflected a rebound from distorted pandemic-era figures. Achuthan warns against attributing the snapback to generative AI merely because the two appeared near each other in time, while still viewing durable productivity growth as essential for reconciling wage gains with lower inflation.
Pandemic shutdowns distorted hours and output
Reopening produced a mechanical productivity rebound
Timing alone does not prove AI caused the increase
Sustained productivity is needed to support real wage growth
“In our simple human brains were like, oh, generative AI gave us this productivity thing, which is not true.”
“How are you going to pay someone five percent more but not have high inflation? For example? Right, you need productivity growth.”
#productivity#ai#covid#wages
◆Hot Take· 2
◆Hot Take14:51
After Decades of Failed Warnings, How Should We Judge Deficits?
Ritholtz questions forecasts that large US deficits must imminently destroy the dollar, unleash uncontrolled inflation, or crowd out capital. The exchange does not dismiss fiscal risk, but argues for returning to first principles and defining observable conditions that would prove or disprove a deficit thesis.
Many longstanding deficit predictions have not materialized
The post-COVID debt increase is historically large
US reserve-currency and superpower status may change its constraints
A useful thesis needs a falsifiable line in the sand
“After being wrong for fifty years, it kind of makes me look at the people warning about deficits and saying, I don't know, You've had…”
“We have to break this down to first principles and figure out why are deficits problematic?”
#deficits#debt#fiscal-policy#dollar
◆Hot Take32:07
The Biggest Weakness of Econometric Models Is the Turning Point
Achuthan accepts econometric models as useful ways to frame current conditions but argues that they struggle at the exact moments that matter most: transitions between upswings and downswings. ECRI instead emphasizes directional change and empirical leading indicators.
Models can organize current observations
Stable relationships can fail near cyclical turns
Economies repeatedly alternate between upswings and downswings
“Econometric modeling is a very useful tool of It can help frame like what are we looking at outside our window?”
“But one of its particular weaknesses, probably the biggest, weakness is it can't handle a turning point.”
#econometrics#forecasting#turning-points#models
✶Explainer· 7
✶Explainer03:26
How Business Cycles Travel Between Countries
Achuthan explains that international cycles propagate through trade, manufacturing links, financial markets, and the United States' outsized global influence. Domestic economies can still follow different paths even while participating in a shared goods or industrial cycle.
Trade is a major but incomplete transmission channel
Financial markets transmit US conditions globally
Manufacturing supply chains link national economies
Domestic and international cycles can diverge
“One key thing we were doing back then was how or if cycles are transmitted internationally.”
“Trade is a big one. Markets are a big one, and a lot of people take their queue from what's going on in the US.”
#globalization#trade#markets#business-cycles
✶Explainer21:31
How Fiscal “Foam on the Runway” Kept the US Out of Recession
The episode describes a tug of war between deteriorating cyclical indicators and extraordinary fiscal and monetary support. Despite contracting GDP in parts of 2022, employment, income, and sales did not collectively contract, while infrastructure spending and labor scarcity continued to support activity.
Leading growth indicators were consistent with recession
Fiscal programs continued feeding private investment
Employment did not contract alongside GDP
Labor scarcity encouraged employers to retain workers
Stimulus offset part of the cyclical downside
“There's been a tug of war, I think, going on for much of twenty three between cyclical impulses to the downsign and foam on the…”
“In order to have a recession, you need to see output and employment going negative along with sales and income, and so those conditions did…”
#stimulus#recession#employment#fiscal-policy
✶Explainer28:47
Why Employers Cut Hours Before They Cut Workers
Businesses scarred by hiring shortages became reluctant to dismiss employees when growth slowed. Instead, employers adjusted marginal levers such as weekly hours, temporary hiring, and the mix of part-time and full-time work, helping payrolls remain positive despite weaker labor demand.
Hiring and firing impose operational costs
Worker shortages created employer PTSD
Hours and temporary hiring weaken before mass firing
Small businesses experienced especially acute hiring difficulty
Expected future growth encourages labor hoarding
“And hiring and firing is very disruptive for a business.”
“If they could see over the valley and hang on to people, they try to do that.”
#labor#employment#hiring#business
✶Explainer50:18
The Inflationary Cost of “Just in Case” Supply Chains
Supply chains optimized for minimal inventory proved fragile during COVID-era disruptions. Rebuilding them for resilience requires warehouses, financing, spare capacity, and redundant shipping arrangements, creating a higher cost structure that may place a new floor beneath inflation.
Just-in-time systems prioritized efficiency over robustness
Resilient inventory requires costly financing and storage
Trade-route and factory disruptions ripple through supply chains
Greater robustness may raise structural inflation
“All those supply chains which used to be just in time, they've been hardened to become just in case.”
“That structural floor is probably a little bit higher because of the more robustness that we're gonna want in our.”
#supply-chains#inflation#inventory#resilience
✶Explainer55:41
Economic Growth Reduces to Workers Plus Productivity
Achuthan decomposes long-run economic growth into workforce growth and productivity growth. Aging populations and low birth rates constrain the first component, while weak economy-wide productivity limits the second, making automation and AI potentially important but not instantly transformative.
Workforce growth is one component of economic growth
Productivity growth is the other component
Japan and China face serious demographic constraints
Technology gains are uneven across sectors
AI may help fill labor gaps over time
“Economic growth is populate your workforce growth plus your productivity growth.”
“Information technology jobs have benefited quite a bit, and the productivity is shot up, But our economy is not simply that, right”
#productivity#demographics#growth#ai
✶Explainer1:00:45
How Repeatedly Higher Inflation Lows Change Public Psychology
The 1970s comparison focuses on the path of inflation rather than claiming the present repeats that decade. Successive inflation downswings stopped at progressively higher levels, eventually changing consumer attitudes and giving policymakers greater political cover for aggressive action.
Inflation can worsen through successively higher cycle lows
Consumers may tolerate early inflation when growth is strong
Persistent price increases eventually change political incentives
Policy responses depend partly on public tolerance
“It was that each time inflation cycled down, it didn't get down as far as it did before, so that you had higher lows in…”
#inflation#1970s#psychology#monetary-policy
✶Explainer1:12:22
What a Soft Landing Actually Looks Like in the Data
A soft landing is defined as a major cyclical slowdown that firms again without aggregate contraction. Achuthan evaluates it collectively through output, employment, income, and sales rather than declaring recession or recovery from GDP alone.
A sharp slowdown can stop short of contraction
Employment helped offset negative GDP readings
Output, jobs, income, and sales should be assessed collectively
A soft landing does not eliminate recession risk beyond the forecast horizon
“You had a cyclical downturn in growth without a contraction, without it going negative in overall growth.”
“There's no one statistic like GDP which is going to define recession, and that would be a soft landing.”
#soft-landing#recession#gdp#employment
▲Takeaway· 1
▲Takeaway44:26
The Global Industrial Cycle Was Turning Up
Achuthan identifies an emerging global industrial upturn driven by strengthening demand rather than a country-specific policy. Early confirmation was appearing in commodity-price inflation, purchasing-manager surveys, and export data, with likely support for manufacturing and energy demand.
The upturn was global rather than country-specific
Industrial demand was bottoming and beginning to rise
Commodity prices, PMIs, and exports offered early evidence
Manufacturing strength reduced near-term global recession risk
“This year we're going to see a global industrial upturn, a bona fide cyclical global industrial.”
“That's cycling, that's bottoming and cycling up.”